Will financial markets climb the summer wall of worries?

Posted on 22. Jul, 2013 by Jean Jacques Ohana in Weekly Focus

Three vulnerabilities are presently threatening the financial system:

The ongoing negative spiral on US Bonds (figure 1). Ben Bernanke made a U turn on the Federal Reserve pledge to reduce the purchase of US Treasuries thus enabling long term interest rates to fall back slightly. Meanwhile, the Federal Reserve will be under pressure to taper the [...]

Developed vs. emerging stocks: mind the gap!

Posted on 08. Jul, 2013 by Jean Jacques Ohana in Weekly Focus

The divergence between the trends of connected assets conveys a very different type of information than the decorrelation between their daily returns. While the latter corresponds to a genuine change of status (e.g. one of the assets shifts from “risky” to “safe haven” or the other way round) and is very rarely observed, the former [...]

Commodities dismal performance conveys global deflation pressure

Posted on 02. Apr, 2013 by Jean Jacques Ohana in Weekly Focus

Despite supportive liquidity and global monetary easing from Central Banks, commodities have been unable to perform since 2011. Commodities had the worst returns among every asset class over the past 250 days. Commodities, currencies and basic resources equities sectors have been under pressure, as illustrated by figure 2.

The poor performance of cyclical markets such as [...]

An equities bubble is swelling now: drawing lessons from past episodes

Posted on 11. Mar, 2013 by Jean Jacques Ohana in Weekly Focus

Global Equities markets are evolving in bubble as showed in figure 1. Riskelia’s bubble indicator measures the regularity of price dynamics over various time frames. An excessive degree of monotonicity in price dynamics characterizes mimetic behavior among market participants who will simultaneously sell their accumulated positions when complacency is called into question by adverse fundamentals. [...]

Why passive investors have so far taken the upper hand… and why this is not sure to last

Posted on 26. Nov, 2012 by Jean Jacques Ohana in Weekly Focus

The rationale behind volatility-weighted allocation strategies is to allocate risk evenly across a diversified set of assets in order to make the strategy robust to various macroeconomic configurations. As showed in figure 1, the assets may be classified into four main clusters:

The risky assets represent equities and assets linked to global growth.

The inflation-protecting assets consist [...]

What could wake up the stalling gold?

Posted on 22. Oct, 2012 by Jean Jacques Ohana in Weekly Focus

Given the coordinated quantitative easing undertaken by Central Banks, the sharp correction of gold vs. all paper currencies is surprising to say the least. The gold is worth less than it was just before the Federal Reserve announced an open ended QE III, whereas the decision undoubtedly surprised market participants.

The gold rise has stalled so [...]

A sunny spell in Asian assets

Posted on 03. May, 2012 by Riskelia in Weekly Focus

Riskelia’s trends have improved on Asian currencies and Chinese equities. As showed in figure 1, several Asian equity indices remained steady despite acute pressure on the funding of euro zone banks and renewed tensions on Spanish debt issues. The Korean KOSPI and the Singapore Strait Times are clear leaders on the upside. Even Chinese equities, [...]

A Chinese metallic thorn in the bulls’ side

Posted on 27. Mar, 2012 by Riskelia in Weekly Focus

The successive central banks interventions have improved the overall liquidity in the financial system. The banks’ funding is ample in the US and close to normal in Europe. The fluidity of transactions is reflected in the implied volatilities of equities, oil and carry trades (figure 1). A positive liquidity environment (characterized by a negative risk [...]

The deflationary spiral: are we already in recession?

Posted on 27. Sep, 2011 by Riskelia in Weekly Focus

The last doubts we could express about a looming deflation threat are fading away.
First of all, the signals on commodities producers become more clear-cut; the recommendation on Gold Miners abruptly receded, conveying a bleak overall picture on the mining and oil sectors:

More generally, all bets identified by the Radar are deflationary as depicted in figure [...]

What does the emerging currencies meltdown foretell?

Posted on 20. Sep, 2011 by Riskelia in Weekly Focus

For sure, the event of the week has been another form of quantitative easing: the agreement reached by the developed countries core central banks (Fed, ECB, BOE, BOJ, SNB) to provide unlimited dollar funding to European bank.
Meanwhile, cyclical markets have responded in contrasting ways. As equities rose, credit markets were less enthusiastic and emerging currencies [...]